CTEA 2220 BUSINESS AND CORPORATE TAXATION

TUTORIAL 3

Question 1
MY Universal Sdn Bhd is a Malaysian resident company set up with the intention of
operating a theme park open to the public. It will not be located in a promoted area. The
promoters have conducted a feasibility study and believe that they can be ready to commence
operations on 1 October 2014. They expect to incur the following amounts of capital
expenditure on or immediately prior to the commencement of operations:
Land
Planting of trees and plants
Construction of road and other infrastructure facilities
Provision of buildings and structural improvements
Buggies and other mechanical rides

RM 000s
3,000
1,000
1,200
1,800
6,000

For the first five years of operation, the adjusted income/(adjusted loss) is expected to be as
follows:
Year to 30 September
RM 000s
2015
(1,500)
2016
(500)
2017
2,000
2018
3,560
2019
4,840
The report is to be prepared on the assumption that MY Universal Sdn Bhd will be eligible
for either pioneer status with the production day fixed at 1 October 2014, or investment tax
allowance with effect from the same date and that all capital expenditure eligible for capital
allowances will qualify for the initial allowance at 20% and annual allowance at 14%.
Required:
Which incentive is more tax efficient for MY Universal Sdn Bhd. should the company
apply for pioneer status or investment tax allowance? The answer should be supported
by detailed computations showing the position under each incentive for the first five
years of operation.

Question 2
The Pelaburan group of companies comprises: Pelaburan Bhd (Pelaburan) and two whollyowned subsidiaries, Subsidiary One and Subsidiary Two. Pelaburan has an issued share
capital of RM12 million and each subsidiary has an issued capital of RM5 million. All three
companies are incorporated in Malaysia and have been actively operating in Malaysia for the
past five years; they each close their accounts annually to 31 August. None of the three
companies have enjoyed any form of tax incentives so far.
Each of the three companies makes an annual donation of RM50,000 to its chosen charity,
which is an approved organisation.
By 31 August 2013, Subsidiary One will complete the automation of its manufacturing
assembly line at a cost of RM10 million. For the year of assessment 2013, Subsidiary One
expects to incur an adjusted loss of RM18 million. However, it expects to register a statutory
income of RM7 million in the year of assessment 2014.
Subsidiary Two expects to register a statutory income of RM12 million from its only source
of income, a trading business, in the year of assessment 2013.
Pelaburans aggregate income for the year of assessment 2013 is expected to be RM500,000,
made up of a share of partnership profit and rental income.
Required:
In respect of Subsidiary One:
(i)
(ii)

Explain how it satisfies the requisite conditions to qualify for the reinvestment
allowance in the year of assessment 2013; and
Compute the companys total income for each of the years of assessment 2013
and 2014, indicating clearly the computation of the reinvestment allowance, the
amount absorbed and the amount carried forward, if any.

Question 3

Question 4

Question 5